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Wednesday, October 8, 2008

The PRO-IP Act and Movies and Music

This week's Law of the Game on Joystiq (link) covers the new PRO-IP Act as it applies to video games. As a sidenote to that column, I wanted to discuss my thoughts on the PRO-IP Act as it applies to movies and music, where I also think the Act is as much a detriment to producers as it is to consumers. I would again like to reiterate that the Act has not been signed into law as yet, but has been passed by both the House and Senate at this time. The final text of the Act is here.

In short, the PRO-IP Act does the following three things:

It increases the penalties for infringement by expanding what is considered a ‘work;’

It broadens the ability of the government to permanently seize goods; and

It creates an Intellectual Property Enforcement Coordinator, a new cabinet position whose sole job is to increase intellectual property enforcement.

This bill was passed based on the theory that intellectual property is under a drastic attack in the US by, seemingly, everyone. There is an element of truth to this, as CD sales have certainly been down, and it's clear the music industry is trying to find a new model, though I'm not sure it's truly broken, or at least waiting for digital sales to catch up. On the other end, the movie industry is certainly losing something to campus piracy, but there is still growth, even if it's short of the gaming industry as of late. In fact, the gaming industry, which is experiencing the most growth, also takes a much different stance on piracy, rarely going after the customers rather than professional pirates. It should also be noted that the biggest dent in piracy could likely be made if enforcement on piracy of physical copies were greater in certain countries outside the United States that I won't name, as tourists have been bringing back stacks of VHS tapes, audio cassettes, VCDs, DVDs, and CDs bought for next to nothing from street vendors for decades. You can even find these pretty easily in many major cities in the US.

Movies

The MPAA is newer to the anti-online piracy front than the RIAA, but online piracy is a convenient scapegoat for box office sales not living up to all expectations. Campus piracy was one of the convenient ones that was eventually brought back to reality from the absurd estimates of 40% of revenue loss (linked above). While there is still sales growth, I expect many executives are concerned about the sudden rise of game sales. I have often wondered if that is, in part, driven by the economics of entrainment hours per dollar spent, as so many games offer a much greater amount of entertainment per dollar spent than a movie ticket.

The movie really has three potential downsides to the PRO-IP Act. The first and most obvious being the negative publicity that the RIAA has enjoyed, which could lead to a further alienation of Hollywood and the general public. The second is what I discuss for game developers in the Joystiq piece, specifically the issues that arise under the new definition of a 'work' and how the overlap may play out and 'force their hand' on suits they don't wish to file. Finally, there's an issue that all media shares with respect to enforcement: many of the people who are sued don't have anywhere near the resources to pay these fines. The end result is you've successfully entered a judgment someone can't pay, had property seized that is at most tangential to the actual piracy, and received a large amount of negative press in the process. Not to mention, you've likely lost a customer, as I can imagine people who are sued by the MPAA aren't likely to head down to the movie theater on a regular basis anymore.

Music

From what I understand from many reports, the music industry, more specifically the RIAA, was one of the key backers of this legislation, but in my opinion, it seems they are the least likely to see any benefit from it. In fact, the enforcement strategy utilized by the RIAA to date has probably done more to alienate their own customers than it has to reduce piracy.

What sets the music industry apart from movies and games is there's no way to experience a song at little to no cost without risk. I think most people would love the opportunity to listen to a song or album one time before deciding whether to purchase it or not. There's no way to rent an album, and those 20 second samples on iTunes or Amazon don't do the full piece justice. Some might say that's changing, as more subscription services become available, but there isn't yet one that offers a complete catalog across all labels. Then there's the simple fact that there are other, potentially larger sources of income for musicians than record sales. The video game industry has no equivalent to a concert; disk sales are more or less all there is to it other than cross-licensing. Movies have more in common, between the box office, DVD, showings on TV, etc., but music is even far more ubiquitous than movies are, as they're in the background of pretty much every other medium, as well as most all venues and events.

And that's why the RIAA's strategy of going after the average Joe who downloads an album once in a while to try to find something new to listen to doesn't make sense. That average Joe probably has spent quite a bit on music over the course of his life, be it buying CDs or merchandise or concert tickets. And I'm sure there are many artists who would rather have people download their album in order to determine if they want to be a fan of the work rather than have no exposure as a result of their label or the RIAA suing their customer.

Ultimately, the way this hurts the music industry isn't in practical enforcement. They backed this bill because it helps their enforcement. It's an issue of image, and as the bad publicity keeps falling on the RIAA, more and more consumers are taking their entertainment dollars elsewhere. It's insulting to the consumer that the RIAA would even suggest that ripping a CD you purchased so you can put it on your iPod is illegal, even though they haven't tried to enforce that idea at this time. Ultimately, this only hurts the artists, which only serves to hurt the development of music in the US, especially for artists who can't or don't get radio time or for listeners who don't listen to what's played on the radio.

Solution?

I've long held the theory that attacking the supply is far more effective than attacking the demand in piracy situations, especially given that the demand are also often the customers you rely on to keep your business going. I'm not saying ignore every consumer. If a consumer is also sharing thousands of files that have been downloaded millions of times, then they're a distributor as much as anything else. But it seems obvious that the thresholds for enforcement need to be well above downloading one work once. The court has imposed reasonableness standards on many other areas of the law, and perhaps a reasonableness standard needs to be used here.

The goal of intellectual property rights was the balance the interests of producers and consumers so that the arts would grow and artists could prosper, and in many ways many people have lost sight of that goal. As we move further into the future, we all need to be prepared to change with the times, and acts like the PRO-IP Act attempt to bind us to business models and methodologies that don't make sense in the digital reality. By the same token, those decrying all intellectual property rights need to understand that without them, much of the media you enjoy today simply would not exist because those who produce it would have no means by which to profit from it. In a perfect world, we would have no need for intellectual property rights because there would be no piracy but there would also be unlimited exposure to new media. In our imperfect world, we need to keep sight of the balance between what both consumers and producers need to coexist in the most reasonable way. It's unfortunate that the PRO-IP Act takes a step backward rather than a step forward in achieving that balance.

11 comments:

this is what you get when you have a complete left leaning congress and senate.welcome to the future ppl.ive gotta hand it to myspace though, they have updated their new media player so that artist can actually place all of their work online.one cold check out the music and buy instantly. great article btw!!

I probubly wouldnt like ANY of the music I do now if not for Napster/WinMX

Actually, I probubly wouldnt even really be into music much, until Napster I didnt much care..

So the RIAA gained me as a customer because I could freely download and listen to music without listening to one of my area's 5 crappy radio stations who repeat the same 5 songs over and over again, or without spending $100s of dollars on CDs with no actual direction..

And I buy band merchandise, cds, and tracks from the itms, I generally use downloads as a sample tray much in the way many people used the radio [Except our radio stations stink, and I rather dislike XM and etc]

Alas, I think the RIAA is trying to blame the shitty stagnating sales of albums on downloading, which I really do not think is the case, I think its more a case of quality, when all I keep seeing are one rap artist after another and some new teenage tart who can sing a little like the last one...

as for the MPAA, they're just going down that path the RIAA has gone down, and if they follow in their path, I don't see things improving for them very much

But regardless, a lot of the things I get also happen to be things I cannot procure another way in the US, ie, quality subtitled anime series that have not yet been liscensed..and British TV shows without the edits to put US commercialism in there

So I'm probubly pretty safe [as well as I have a "fair use" argument for most everything else on my hard drive because everything thats not one of those two I've "recorded" from my satellite receiver and edited the commercials out]

That is exactly my thing with music Trevor. All the music I bought (Prog metal, Jpop, game soundtracks, and movie soundtracks) rarely gets played on the radio and I woudln't have even known they exist to buy if i hadn't downloaded them in the first place.

I agree with you nearly entirely. We're reaching a point where the courts will need to step in and decide the constitutionality of all these laws. Certainly draconian measures and unreasonable expectations from industry have done nothing but harm consumers. It does bode well for the game industry that sales continue to rise though it is incredibly unfortunate that other entertainment industries haven't followed their example. Here's to a more reasonable future even if tomorrow appears anything but!

xgarryx, copyright is one of those areas that tends to make strange bedfellows. "Left" and "right" generally don't actually tell you a thing about how someone stands on copyright. Representative Boucher, as a counterexample to your statement, is a somewhat liberal Democrat who is probably the most reasonable member of Congress on copyright.

Editor in Chief

Mark Methenitis is an attorney in Dallas Texas. Mark received his Juris Doctorate and his Master of Business Administration from Texas Tech University and his Bachelor of Arts from The University of Texas.

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